Deemed Cenvat credit on pre-1-5-2001 stock cleared on ad valorem duty remains admissible outside the special procedure.

Deemed Cenvat credit was held admissible on stock of processed fabrics manufactured before 1-5-2001 and cleared thereafter on ad valorem duty. The amended paragraph 4A in Notification No. 7/2001-C.E. (N.T.) applied only where the manufacturer followed the special procedure under Rule 96ZNA and paid duty under Rule 96ZNC; that condition was not met here. Rule 96ZNB(7)(a) did not bar the credit on these facts, because the goods were not cleared under the special procedure. The demand, penalty and consequential interest were therefore not sustainable.

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Issues: Whether deemed Cenvat credit was admissible on stock of processed fabrics manufactured before 1-5-2001 and cleared thereafter on payment of ad valorem duty, notwithstanding the special procedure under Rule 96ZNA and the amended notifications.

Analysis: The appellant had manufactured the goods before 1-5-2001 and the stock remained lying as on 30-4-2001. Rule 96ZNB(7)(a) excluded only goods manufactured or produced prior to 1-5-2001 and cleared on or after that date from the special procedure. The benefit of the amended paragraph 4A in Notification No. 7/2001-C.E. (N.T.) applied only where the manufacturer availed the special procedure prescribed under Rule 96ZNA and paid the specified sum of duty under Rule 96ZNC. Since the goods in question were cleared under the old ad valorem method and not under that special procedure, denial of deemed credit was not justified. The issue stood covered by the cited precedent and the same reasoning applied.

Conclusion: Deemed Cenvat credit was admissible and the demand, penalty and consequential interest could not be sustained.

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